Posted by John Behle on January 07, 1999 at 12:36:34:
In Reply to: Seasoning on a note posted by Reg(TX) on January 06, 1999 at 10:35:59:
10-20 years ago seasoning was very important. Many investors wouldn't even consider a note that wasn't seasoned for 6-12 months. With the competition among funding companies the requirements have loosened up among funding sources.
As was mentioned, pre-paying the seasoning will help in many cases.
As far as buying for your own account or through local investors, seasoning puts a different light on things. A seasoned note carries it's own credit history and track record. There is a greater safety factor. The Payor has demonstrated the two crucial elements - both the "Ability" and "desire" to pay.
Most notes that go bad do so in the first year. An extremely high percentage that go bad do so within the first two years. So, if you have a note that is seasoned over 1-2 years, you have a high confidence factor.
Yet, seasoning is not that big of a deal. LTV is the key factor and always will be. People are starting to recognize that fact.
The "due-diligence" is different with an un-seasoned note. It is more like a new mortgage loan and a higher focus needs to be put on both the payor and the property value. You have to establish the Payor's ability and desire to pay. Financial data demonstrates the ability. On an un-seasoned note a loan application should be taken and ratios should be analysed. Use a FNMA 1003 Residential Loan Application for this purpose. Some states are actually pushing for this type of "due-diligence" in all seller financing. Utah is way ahead in this realm. Agents MUST comply with many requirements when involved in seller financing.
The "desire" to pay comes through credit reports. It's very simple to pull credit. Less than a minute - and you have the right to do so. Checking the credit is absolutely crucial in new transactions. Most do it in all transactions.
As a new investor, I wouldn't tackle un-seasoned paper at the first. Before doing any "Table funding" or buying notes right out of escrow, I would recommend taking some classes in conventional mortgage brokerage to understand the process more.
- Re: John your help is greatly appreciated Reg(TX) 13:06:49 1/07/99 (2)
- Classes near Dallas John Behle 14:48:17 1/07/99 (1)
- Re: Classes near Dallas Ken 23:18:12 1/07/99 (0)